Joslin Rhodes
17:07, Sun 5th February 2012

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Fixed rates

Pretty much do what they say on the tin. A set rate offered for a certain length of time, normally 2,3,5,7,10,15 or even 25 years. The longer the fixed rate period the higher the rate, as the lender is taking a greater risk.

Fixed rates are very attractive in a rising market as they give protection against increases in interest rates but are less attractive in a falling market for obvious reasons.

Fixed rates are normally bought by the lender in bulk from the money markets and are therefore likely to be a limited issue.


Advantages

  • Gives you a guaranteed payment every month, irrespective of interest rates

 

Disadvantages

  • If interest rates fall then your payment will remain the same
  • Are normally marginally higher than an equivalent tracker rate